Present & Post Covid 19 Rent review disputes & ADR
Arran Dowling-Hussey[1]
At the best of times there are disputes between commercial landlords and retailers in England and Wales. Over the last month the effect of the Covid 19 public health crisis has laid waste to the high street. Most shops can not now open. All pubs, restaurants, cinemas and so on are closed. Where there is no footfall there is no spending by customers and no income generated to pay rent. No one at the time of writing knows exactly when this position will change. The present scenario presents an unattractive vista for commercial landlords. Nothing operates in a vacuum the rent these landlords were expecting will be income for investors who may own a small retail building and have no other salary. Large pension funds, who often invest in the high street, will continue to have the normal financial obligations to the members of their fund. Some landlords will be reliant on their commercial rental income to service a loan secured on the building they rent out.
Emergency legislation passed at the end of March in response to the crisis bars landlords from evicting those who don’t pay commercial rent for the next 3 months. Even if that were otherwise the adverse economic impact of the ongoing crisis means it is unlikely that new tenants could be easily found if at all to replace anyone who left a premises. Moreover, public opprobrium could attract itself to anyone seen to act in present times in a ‘sharp’ or uncaring manner. British Prime Minister Boris Johnson pointedly remarked on March 29, 2020 that ‘there really is such a thing as society.’ Everyone has been encouraged to ‘rally around.’ Johnson’s remarks were not without context. Whilst his late predecessor. Margaret Thatcher, complained that individual words in her 1987 interview with Women’s Own had been taken out of a wider more sympathetic quote she is, nevertheless, much associated with the contention ‘that there is no such thing as society.’
Be that as it may and as admirable as it is that we are told the world post Covid 19 will function differently and by inference in a more caring manner landlords will at some point want a return to normality. Those who own a large estate of premises were requested in the middle of last month by well-known chains to reduce rent by 50% and/or to implement rent free periods.[2] After ‘doing their bit’ many landlords will want to in as far as is possible go back to the position they were in as of January or February, 2020.
It seems unlikely, for now, that the cascade of government cash which has tried to manage the enormous impact of the crisis on the wider economy will be directed at commercial landlords. The most obvious amelioration of their position, at present, is that they can usually take a payment break on loans they may have on the premises they are renting out. When we come out of this period it seems that there will be inevitable conflict between landlords and tenants with the former wanting to go back to how it was and the latter wanting a continuation of more sympathetic conditions.
Whilst there are well established rent review arbitration processes to deal with such an eventuality it could also be that a mediation will provide a time and cost effective way of resolving such disputes.
Members of Arbitrators@33BedfordRow have experience, both as party representative and arbitrator/mediator, of a wide range of disputes including but not limited to commercial landlords & tenant disputes. For queries contact [email protected]
[1] Arran Dowling-Hussey is a Barrister, Arbitrator and Mediator working from 33 Bedford Row, London he can be contacted at [email protected]
[2] https://www.theguardian.com/business/2020/mar/19/billionaire-retailers-seek-rent-cuts-during-coronavirus-crisis (accessed on April 6, 2020)